Dematerialisation

Dematerialisation offers flexibility along with security and convenience. Holding share certificates in physical format carried risks like certificate forgeries, loss of important share certificates, and consequent delays in certificate transfers. Dematerialisation eliminates these hassles by allowing customers to convert their physical certificates into electronic format. Dematerialisation is a process through which physical securities such as share certificates and other documents are converted into electronic format and held in a Demat Account.

An investor intending to dematerialise its securities needs to open a Demat Account with a Depository Participant (DP). A depository is responsible for holding the securities of a shareholder in electronic form, these securities could be in the form of Share Certificates, bonds, government securities, and mutual fund units, which are held by a registered Depository Participant (DP).

As a share or debenture holder it is important to be aware of the procedures to manage the investment in securities collective name for equity shares, debenture, bonds, mutual fund units etc. Managing investment in securities is simple and easy in electronic form (dematerialised form) and it has many advantages over managing is in physical form like in past there is certificate issued in favour of shareholder if he/she buy stocks or any debenture bonds.

Section 5 of the Depositories act 1996 beneficial owner enter into an agreement with the depository for availing it’s service.

Investment in shares and debentures can be held in electronic or dematerialised can be held in electronic or dematerialised form in a depository. Depository is an entity which holds securities i.e Shares, bond’s, debentures, mutual fund units etc. of investors in electronic form at the request of the investor.

National securities depository Ltd (NSDL) and Central depository services Ltd (CDSL) are the depositories that are licensed to operate in India and are registered with SEBI.

Dematerialisation is comparable to keeping your money in a bank account. In demat form the physical share certificates are replaced by e-form buying of shares are reflected as credits in your demat account and sale are reflected as debits.

It is advisable to hold the securities in demat form as it offers many advantages like in Primary market as many public issue are taking place in demat mode. To apply in publice issue you need to have a demat account. Allotment of shares in IPO(Initial Public offer) is credited to the demat account.

In secondary market if you buy any shares thn after T+2 share credit on your demat account and you don’t have any need to visit anywhere to collect your certificate. Same in selling you can sell your shares anytime in working market. Unlike in physical shares you’ve to visit exchange office and in Ring you’ve to buy or sell your stocks. (Ring is a place where in past the buyer seller bid or ask for their shares).